Welcome Guest [Log In] [Register]


Reply
End of China boom is hurting, but not all is lost, Citi says
Topic Started: 19 Sep 2014, 03:49 PM (2,565 Views)
Jimbo
Member Avatar


Veritas
19 Sep 2014, 11:11 PM
QE? Was it ever used anywhere before the Japanese did it?

Correct.

Quote:
 
But what if the Fed didnt do it? Deflationary carnage probably.


As in all recessions before, the weak would have been shaken out and the strong would have survived, trimmed down and come back stronger. It wouldn't have been pretty but it would all be over by now.

Quote:
 
I basically think guys like Ben Bernanke and Yellen know what they are doing.


They know what they are doing all right and they know where it is going. That is why Yellen says that rates won't be raised for a "considerable period of time".
Edited by Jimbo, 19 Sep 2014, 11:36 PM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
Profile "REPLY WITH QUOTE" Go to top
 
Garden Variety
Default APF Avatar

miw
19 Sep 2014, 11:33 PM
What has QE got to do with solvency?
is the fed solvent?
Profile "REPLY WITH QUOTE" Go to top
 
Jimbo
Member Avatar


Garden Variety
19 Sep 2014, 11:36 PM
is the fed solvent?
The FED is solvent because it holds treasury bonds and other securities.

It is a bit like a bankrupt me giving you an IOU for $10. Technically you have $10 but in reality we are both fvcked.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
Profile "REPLY WITH QUOTE" Go to top
 
Garden Variety
Default APF Avatar

Jimbo
19 Sep 2014, 11:42 PM
The FED is solvent because it holds treasury bonds and other securities.

It is a bit like a bankrupt me giving you an IOU for $10. Technically you have $10 but in reality we are both fvcked.
riiight .... other securities ... at book value, not market value

honest yer honour, as long as I never have to sell it, its worth millions!
Profile "REPLY WITH QUOTE" Go to top
 
newjez
Member Avatar


Jimbo
19 Sep 2014, 11:36 PM
Correct.




As in all recessions before, the weak would have been shaken out and the strong would have survived, trimmed down and come back stronger. It wouldn't have been pretty but it would all be over by now.




They know what they are doing all right and they know where it is going. That is why Yellen says that rates won't be raised for a "considerable period of time".
Europe?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Profile "REPLY WITH QUOTE" Go to top
 
miw
Member Avatar


Garden Variety
19 Sep 2014, 11:47 PM
riiight .... other securities ... at book value, not market value

honest yer honour, as long as I never have to sell it, its worth millions!
Actually, that is true of fixed income. If you don't sell it, it gets redeemed at par, which is what will happen to almost almost all the securities held by the fed.

Not only that, but the market value has held up way beyond what anyone expected.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
Profile "REPLY WITH QUOTE" Go to top
 
Garden Variety
Default APF Avatar

miw
20 Sep 2014, 12:12 AM
Actually, that is true of fixed income. If you don't sell it, it gets redeemed at par, which is what will happen to almost almost all the securities held by the fed.

Not only that, but the market value has held up way beyond what anyone expected.
so let me see if ive got this right

some bank A has a security, mebbe an MBS paying 3%

fed buys security from bank A for 100, starts earning 3%

bank A has 100

fed raises rates to 5%

bank A deposits 100 with fed, starts earning 5%

so the fed has 4 trillion in assets paying 3% and 4 trillion in deposits it pays 5% on

and thats why the fed will raise rates next year, coz it makes total sense to borrow at 5% and lend at 3%

but the fed can print money, so it dont matter if its liabilities are bigger than its assets

solvency is just for you n me eh?
Profile "REPLY WITH QUOTE" Go to top
 
peter fraser
Member Avatar


Garden Variety
20 Sep 2014, 12:33 AM
so let me see if ive got this right

some bank A has a security, mebbe an MBS paying 3%

fed buys security from bank A for 100, starts earning 3%

bank A has 100

fed raises rates to 5%

bank A deposits 100 with fed, starts earning 5%

so the fed has 4 trillion in assets paying 3% and 4 trillion in deposits it pays 5% on

and thats why the fed will raise rates next year, coz it makes total sense to borrow at 5% and lend at 3%

but the fed can print money, so it dont matter if its liabilities are bigger than its assets

solvency is just for you n me eh?
Well in your scenario the assets still equal the liabilities It's the cash flow that is going wrong.

You are right on the point that a currency issuer can't become insolvent unless the politicians do something silly, like not approve a lift in the debt ceiling.

I see that you have lost your "asshole".
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
miw
Member Avatar


Garden Variety
20 Sep 2014, 12:33 AM
so let me see if ive got this right

some bank A has a security, mebbe an MBS paying 3%

fed buys security from bank A for 100, starts earning 3%

bank A has 100

fed raises rates to 5%

bank A deposits 100 with fed, starts earning 5%

so the fed has 4 trillion in assets paying 3% and 4 trillion in deposits it pays 5% on

and thats why the fed will raise rates next year, coz it makes total sense to borrow at 5% and lend at 3%

but the fed can print money, so it dont matter if its liabilities are bigger than its assets

solvency is just for you n me eh?
The Fed can choose to pay whatever it wants on excess reserves. In practice while there is so much excess reserves, the rate will need to be fairly close to the fed funds rate. It's only reasonable that it does, since excess reserves is essentially ((total deposits) - (total lending)) or money on which the banks pay interest to depositors and insurance premiums to the FDIC, but do not and cannot have a corresponding return-producing asset, and they are forced to hold these excess reserves, essentially by QE.

It also controls absolutely the amount of reserves in the banking system. (But banks move the reserves around by borrowing and lending from each other in the settlements process.) A bank cannot just "deposit" 100M with the fed. They get the excess reserves as a result of the Fed buying securities from them, or through them from private persons who then deposit the proceeds with the banks.

But anyhow, let's take the example or a UST asset held on the Fed's balance sheet. The coupon is 3% and it is paid half-yearly. On interest day, the UST has to pay 3% to the fed.

Similarly, for a MBS paying 4.5%. On interest day, the issuer of the MBS has to pay the interest to the fed.

Similarly, every day the fed will pay the rate determined by the fed for excess reserves to the banks on their excess reserves. It is estimated that by the end of 2016, all going well, the fed funds rate will be maybe 2.5% otherwise it will likely be lower. Excess reserves currently stand at $2.3T. Once the fed stops rolling over securities, the balance sheet will start shrinking by an average of about 400B/year but with a curve peaking about 6-7 years out. So let's say it's still 4T in 2016, made up of 2.3T UST and 1.7T MBS

At a guess I'd say the fed gets an average of about 2% on UST and 3.8% give or take.

So fed collects $46B on the UST and $65B on the MBS, for a total of $111B.
At the same time it pays approx. 2.5% on $2.3T of excess reserves or $57.5T

This gives the fed $53.5B in nett interest income which it immediately turns over to treasury.

If interest rates were to spike to the point that the fed made a nett loss, the UST would need to fund the fed from taxes and borrowings. The forecast is that fed nett interest income will bottom out at about $17B in 2018 which is below the average for the decade before the GST which was $25B. Lately the fed's been forking over more like $88B/annum.

The fed has absolutely no power to print money. The UST does have the power to print money (or at least the Congress could give it that power), but in modern times it has never done so because it has always had more demand for USTs than it has needed to issue.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
Profile "REPLY WITH QUOTE" Go to top
 
John Frum
Member Avatar


miw
19 Sep 2014, 11:33 PM
As far as I can see all it does is tweak distort the long end of the yield curve
There, fixed it for you
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy